What Software as a Service Really Provides
Software as a Service, or SaaS, is seen and marketed as a way to remove or reduce the complexities and cost associated with local enterprise software deployments, especially where such software has a desktop installation facet to it.
As is typical with all (relatively new) technologies – especially in recent years – there comes the inevitable media hype that insists that this will be the wave of the future, that all prior approaches are obsolete, and that any CIO not looking to convert all of his/her organization’s applications to this model, is looking to get fired.
Let’s be a bit more pragmatic, shall we?
The truth of the matter, as you might expect, is that SaaS has both pros and cons, regardless of whether you are a provider or consumer of the technology. And let’s not forget that technology does not automatically get easier as it gets more sophisticated. Yes, SaaS use will become more prominent in the next decade, but like other technology before it, there will be some ups and downs on the way to world domination. Let’s go over a few key points of SaaS in order to make this picture much more clear.
What the Customer Expects
From a customer’s perspective, here are 5 major benefits of Software as a Service:
- Greater Functionality for Lower Costs
- Less Vendor Lock-in
- Greater Scalability
- Ubiquitous Access for Mobile Employees
- Reduced Security Concerns
What the Provider Expects
From a provider’s perspective, here are 5 major benefits of Software as a Service:
- Steady Revenue
- Tighter Control over the Code
- Less Difficulty in Rolling Out Upgrades
- Diminished or Eliminated Piracy Concerns
- Access to Customer Data for Value Add Opportunities
What Reality Tends to Impose on Both Parties
Reality does not always cooperate with the best laid plans, unfortunately. In addition, some of the benefits that a provider wishes to derive from the SaaS solution he or she is selling, is in direct opposition to benefits that the customer is looking to obtain.
The customer wants to minimize upfront costs, and to be able to grow and shrink expenses as they see fit over the life of the service.
The provider wants to maintain a steady revenue stream with many up-sell opportunities over the life of the contract, and reduces or eliminates costs associated with piracy.
Winner = Everyone: Depending on how the contract is worded, each party can manage to get their objectives met here without huge issues. The customer will end up with stable operating expenses, and eliminate a great deal of fun with capital expenses and hardware/software depreciation. And as long as the vendor does what is needed, the subscription costs should remain the same or grow with the business. As a plus, the vendor can turn off access whenever the custom stops payment.
The customer expects that the complexity of building or maintaining enterprise applications will largely go away with a SaaS deployment. This reduces downtime as well as costly headcount.
The provider benefits from the perception that installation is simple and straightforward and that upgrade pain is minimized, because it keeps subscriptions coming in from the customers. On the back-end, however, there is a tremendous amount of architectural complexity that goes into providing a system that is always up and services separate clients, and handles upgrades with minimal disruption.
Winner = It Depends: If the vendor is good, then the customer wins, as they have transferred all their upgrade issues to the provider for a steady monthly fee. If, however, the vendor did not plan well from an architectural standpoint, and lacks good operational procedures around Change Management & Release Management, then both the vendor and the customer will lose, as SaaS puts the entire burden for a successful upgrade on the back of the provider.
The customer wants to be able to quickly grow as client volume increases. Spikes in traffic should be sustainable, as well as access from many parts of the globe.
The provider needs to be able to support sudden increases in customer traffic with minimal latency, and be able to provision additional storage and/or computing power on demand.
Winner = Customer: There are no real vendor benefits here, other than being able to assure customers that their peak traffic can be supported upon demand. Doing this successfully requires a great deal of planning of infrastructure architecture. Doing it cost-effectively requires that the platform be well-developed from the software perspective as well. A good pricing model will ensure that the investment pays for itself quickly (ROI).
The customer wants to be able to access the application at all times – and I do mean all times. Furthermore, they expect very little inconvenience from maintenance of the application platform.
The provider expects that they will be able to roll upgrades into the environment without disrupting existing users, thereby keeping up with service level agreements (SLAs).
Winner = Customer: The customer is the primary winner here, as they typically incur far less downtime for upgrades to the platform or the underlying infrastructure than they would with an in-house enterprise application. The vendor has to pay a pretty penny to provide a properly architected platform that will turn this from market-speak into reality. The bad news is when the vendor does have an extended outage in their SaaS environment, the customer has virtually no recourse beyond remuneration for downtime. SalesForce.com and Google.com have both experienced problems in 2009.
Access & Security:
The customer wants to have secure, ubiquitous employee and partner access to the application from the office, the home, and “the road”, but they want the security to be unobtrusive.
The provider needs to ensure a secure environment that walls off clients from one another as much as possible, and is compliant with the government or industry regulations pertaining to information security and privacy.
Winner = It Depends: Although not totally impossible to obtain, this is almost never a win-win scenario. The vendor must ensure that they educate the customer about the need for information security, and they must design sufficient layers of security to mitigate risk at the customer level. In most cases, however, shortcuts are made in this area to favor ease of access over security. This results in either the customer getting the easy access that is desired, or the vendor manages to implement good security and auditing functionality that the customer deems a little tedious.
The customer wants the greatest flexibility to move around and use whatever provider is offering the best value proposition at any given moment.
The provider is looking for additional ways to make money on the customer data stored on its network, and make it even more difficult for the customer to simply take the data and run with it.
Winner = Vendor: The vendor tends to win this battle, despite the heavy use of phrases such as “standards compliant” and “easy export functionality” in the marketing materials. The customer will almost always find it harder to export the data being stored in the SaaS application in a very useful format that could be easily imported elsewhere.
The customer wants the be able to take advantage of new features without a whole lot of implementation time or end-user training (we’ve already covered costs).
The provider is looking to avoid big-bang releases, instead, providing new functionality in small chunks on a frequent schedule.
Winner = Vendor: The vendor usually gets the better end of this deal, because small and frequent releases give them less time to fix bugs *before* releasing the code into production, so they get dealt with after release. In other words, customers double as beta testers for some functionality. Additionally, the customer is largely tied to whatever changes are released, even if they preferred the previous edition of the functionality more. As the SaaS platform matures (and revenue increases), the provider gets better at developing multiple environments for effective testing, and with staging releases across the customer base in a controlled manner.
It is vital that organizations perform due diligence when seeking out a SaaS solution for their enterprise. Stick with vendors that allow pilot testing and customer-driven demo sites. Be sure to test mini migration scenarios if at all possible. And, above all else, be sure to focus on the service level agreement (SLA) being offered to ensure that there is some recourse in the event of a prolonged system or network failure by the SaaS vendor that impacts your business.
SaaS is real, as are its many benefits, but there are just as many potential drawbacks, if you don’t manage the process of selecting a vendor and solution.
Remember: You cannot outsource your problems, as you simply make them harder and more costly for you to manage. Be sure you understand what you need and what the vendors you evaluate can provide, or you’ll be in for a rough ride. At that point, SaaS won’t taste so good to you…
I’d love to hear your thoughts about SaaS whether you are a customer, provider or both.